Operating and Finance Lease Liabilities

12 Months Ended

Dec. 31, 2021

Operating and Finance Lease Liabilities

Operating and Finance Lease Liabilities

12. Operating and Finance Lease Liabilities

As of December 31, 2021, the Company had operating leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash, security deposits and pledged escrows (see also Note 1, “Nature of Operations”) as summarized below.  These leases expire over the next one to nine years. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease.  

Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote.  At the end of the lease term, the leased assets may be returned to the lessor by the Company, the Company may negotiate with the lessor to purchase the assets at fair market value, or the Company may negotiate with the lessor to renew the lease at market rental rates.  No residual value guarantees are contained in the leases.  No financial covenants are contained within the lease, however there are customary operational covenants such as assurance the Company properly maintains the leased assets and carries appropriate insurance, etc.  The leases include credit support in the form of either cash, collateral or letters of credit.  See Note 22, “Commitments and contingencies,” for a description of cash held as security associated with the leases.    

The Company has finance leases associated with its property and equipment in Latham, New York and at fueling customer locations.  The fair value of this finance obligation approximated the carrying value as of December 31, 2021.

Future minimum lease payments under operating and finance leases (with initial or remaining lease terms in excess of one year) as of December 31, 2021 were as follows (in thousands):

			Finance		Total
		Operating Lease	Lease		Lease
		Liability	Liability		Liabilities
2022	$	51,538	$	6,402	$	57,940
2023		51,288		6,306		57,594
2024		50,437		6,278		56,715
2025		46,733		9,177		55,910
2026		38,760		5,847		44,607
2027 and thereafter		37,342		773		38,115
Total future minimum payments		276,098		34,783		310,881
Less imputed interest		(69,641)		(5,454)		(75,095)
Total	$	206,457	$	29,329	$	235,786

Rental expense for all operating leases was $38.6 million, $22.3 million, and $14.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.  

The gross profit on sale/leaseback transactions for all operating leases was $99.8 million, $61.0 million, and $26.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. Right of use assets obtained in exchange for new operating lease liabilities was $120.7 million, $58.5 million and $37.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

At December 31, 2021 and 2020, the right of use assets, net associated with operating leases was $212.5 million and $117.0 million respectively.  

At December 31, 2021 and 2020, the right of use assets associated with finance leases was $33.9 million and $5.7 million, respectively.  The accumulated depreciation for these right of use assets was $1.5 million and $102 thousand at December 31, 2021 and 2020, respectively.  

At December 31, 2021 and 2020, security deposits associated with sale/leaseback transactions were $3.5 million and $5.8 million, respectively, and were included in other assets in the consolidated balance sheet.

Other information related to the operating leases are presented in the following table:

		Year ended		Year ended
		December 31, 2021		December 31, 2020
Cash payments (in thousands)	$	37,463	$	22,626
Weighted average remaining lease term (years)		5.6		6.0
Weighted average discount rate		10.9%		11.7%

Finance lease costs include amortization of the right of use assets (i.e., depreciation expense) and interest on lease liabilities (i.e., interest and other expense, net in the consolidated statement of operations), and were $2.1 million for the year ended December 31, 2021. Finance lease costs were immaterial for the year ended December 31, 2020 and 2019.

Right of use assets obtained in exchange for new finance lease liabilities were $30.2 million and $4.1 million for the years ended December 31, 2021 and 2020, respectively.

Other information related to the finance leases are presented in the following table:

		Year ended		Year ended
		December 31, 2021		December 31, 2020
Cash payments (in thousands)	$	3,648	$	471
Weighted average remaining lease term (years)		4.56		5.6
Weighted average discount rate		6.7%		8.2%

The Company has outstanding obligations to Wells Fargo under several Master Lease Agreements totaling $123.5 million at December 31, 2021. These outstanding obligations are included in operating lease liabilities and finance obligations on the consolidated balance sheets.